Shareholders To Drop Lawsuit

Shareholders Decide To Drop Lawsuit

November 21, 1992|By DIANE LEVICK; Courant Staff Writer

Travelers Corp. shareholders who sued the company after stunning news of its real estate-investment troubles in 1990 are dropping the case, saying it would be difficult to overturn a judge's ruling against them.

The lawsuit alleged that the company and top executives had fraudulently misled shareholders about the health of Travelers' mortgage loan and real estate portfolio.

Shareholders sued days after Travelers announced in October 1990 that it was adding $650 million to reserves for the problem investments and cutting the stock dividend by a third, to 40 cents a share.

U.S. District Judge Alan H. Nevas dismissed the suit in Hartford in August -- the second time he had dismissed the case in nine months. After the August dismissal, shareholders had filed a notice that they would appeal in the U.S. Court of Appeals.

But the shareholders have decided to withdraw their appeal, and the withdrawal is expected to be approved by the court within days, Travelers said Friday.

The decision to withdraw was not part of any settlement agreement, spokesmen for both sides said.

"Obviously this is a very positive result," said George A. McKeon, Travelers' general counsel. "There was no payment by Travelers, and we are pleased to have this litigation behind us."

Plaintiffs' counsel recently approached Travelers to try to settle, but the company wasn't willing to pay, said David M. Cain, counsel at Travelers.

The shareholders don't believe Nevas' opinion was correct, "but it does have judicial weight and it would be difficult to overturn," said Robert I. Harwood, co-lead counsel for the plaintiffs.

Nevas dismissed the case because, he said, it lacked the specifics needed to show that Travelers fraudulently concealed information from stockholders, as they alleged.

Harwood said it's difficult for shareholders to know exactly

what goes on in a company behind the scenes. But the shareholders' lawyers believed that the suit laid out a "matrix of facts that would lead to an inference of fraud," Harwood said.

He noted that the federal Securities and Exchange Commission has been investigating the way Travelers handled reporting on its real estate-related investments.

Launched more than a year ago, the non-public inquiry is examining Travelers' disclosures on lending and recognition of losses going back to Jan. 1, 1988. The SEC has announced nothing on the inquiry